I am trying to determine the BEST intermediate-term US treasury bond fund/ETF for use in a taxable account. By best, I mean:
- should hold only US treasuries
- low expense ratio
- should be tax efficient (not a lot of yearly capital gains)

Here is the distribution data for the past few years, pulled from Morningstar:

Summary:
VFIUX had sizable capital gains in 2015 and 2016.
VGIT/VSIGX had small capital gains.
SCHR and IEI had no capital gains.
SCHR and IEI are the most tax-efficient, and since the ER of SCHR is less than half of IEI:

SCHR is the best choice for a taxable account.

Additional considerations:
If you have to pay a commission to buy SCHR, or if you are trying to only use Vanguard products to meet Voyager/Flagship requirements, then SCHR may not be the best for your situation.

Capital gains are not the only concern when considering tax efficiency. Dividends from bond funds do not receive the same preferred tax treatment as do qualified stock dividends or long-term capital gains; they are taxed at your marginal tax rate just like any other regular income. Granted that dividends from Treasurys are not taxed at the state or local level, they are not generally considered "tax-efficient" in a taxable account at a Federal level.

It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

I would say use VGIT at vanguard or SCHR if you are at schwab. Negligible difference.

If you believe that low cost active management can add value then use VFIUX if you can afford the 50k for admiral shares. I believe vanguard can make up 3 basis points of difference long term vs. the index.

In the end, these funds are all so ridiculously similar it will not make any difference what you use.

I would say use VGIT at vanguard or SCHR if you are at schwab. Negligible difference.

If you believe that low cost active management can add value then use VFIUX if you can afford the 50k for admiral shares. I believe vanguard can make up 3 basis points of difference long term vs. the index.

In the end, these funds are all so ridiculously similar it will not make any difference what you use.

I agree with you regarding SCHR vs VGIT, they are very similar. IEI is also not bad, though it's expenses are >2x higher.

I also concur that the active management of VFIUX could give that fund better returns, but the capital gains that the fund managers create seem to make that fund less suitable for a taxable account than the others.

This being a bond fund, I believe capital gains would either be the same (if short term) or less (if long term) than the taxes on the ordinary income. So couldn't long term capital gains actually be a better way to generate total return than with income?

They are all very similar. The active Vanguard fund is not necessarily all treasuries all the time. My records show that it was only 90% Treasuries last June (M*) data with an average credit rating of AA. It's now 99.9% T's with a credit rating of AAA.

I use all of them in different accounts except for the Schwab fund and that's only because we have most of our Treasury ladder at Schwab and have little use for a fund.

You might want to look at the duration. With rates likely to go up the shorter duration funds might be given a closer look. IEI is about a year shorter.

A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

This being a bond fund, I believe capital gains would either be the same (if short term) or less (if long term) than the taxes on the ordinary income. So couldn't long term capital gains actually be a better way to generate total return than with income?

Long-term gains are taxed at a lower rate.

Short-term gains might wind up being taxed at a slightly higher rate, because most states tax short-term gains on Treasury funds, while they do not tax the dividends.

Treasury funds are unlikely to have much in short-term gains, so the gains will still make them more tax-efficient. The reason for long-term gains is that the Treasuries in the fund change. For example, a fund holding 5-10 year Treasuries will buy 10-year bonds and sell them five years later as 5-year bonds. If the 5-year yield now is 1% less than the 10-year yield five years ago, there will be a 5% gain on these bonds, which is 1% of the fund assets.

I also concur that the active management of VFIUX could give that fund better returns, but the capital gains that the fund managers create seem to make that fund less suitable for a taxable account than the others.

Given that VGIT and VSIGX are share classes of the same fund, maybe VSIGX would be the preferred fund over VFIUX from a tax standpoint, the same way that stock index funds sharing ETF classes can use the ETFs to effectively share cap gains burdens (as I understand it)?

"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

I accidentally started a knock down drag out thread about this after forgetting how to use morningstar. It ended up being a better discussion than it should have.

Anyhow, the conclusion was that SCHR is the intermediate treasury bond champion.

Are you referring to this thread? I don't see the consensus emerging that SCHR is better than VGIT. Anyway, since that thread the two funds have converged even more, as VGIT is now a pure treasury fund.

"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

I accidentally started a knock down drag out thread about this after forgetting how to use morningstar. It ended up being a better discussion than it should have.

Anyhow, the conclusion was that SCHR is the intermediate treasury bond champion.

Are you referring to this thread? I don't see the consensus emerging that SCHR is better than VGIT. Anyway, since that thread the two funds have converged even more, as VGIT is now a pure treasury fund.

FWIW, I just had to make this decision, and went with VSIGX over VFIUX (I prefer to stick to Vanguard funds, so those were the options). I decided the lower expense ratio, simplicity of indexing, and vague possible benefits of an ETF share class made it a potentially better choice.

"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

FWIW, I just had to make this decision, and went with VSIGX over VFIUX (I prefer to stick to Vanguard funds, so those were the options). I decided the lower expense ratio, simplicity of indexing, and vague possible benefits of an ETF share class made it a potentially better choice.

If I had to choose between VSIGX and VFIUX, I would go with VSIGX for the same reasons you gave.